Q1 2025 ARC Resources Ltd Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the ARC Resources First Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Good morning, ladies and gentlemen, and welcome to the Arc resources first quarter 'twenty 25 earnings conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

If at any time during this call you require immediate assistance. Please press star zero for the operator.

Operator: This call is being recorded on Friday, May 2, 2020.

Dale: This call is being recorded on Friday may two 2025, I would now like to turn the conference over to Dale local manager of capital markets. Please go ahead.

Dale Lewko: I would now like to turn the conference over to Dale Lewko, Manager, Capital Markets. Please go ahead. Thank you, Operator. Good morning, everyone. And thank you for joining us on our first quarter earnings conference call.

Speaker Change: Thank you operator, good morning, everyone and thank you for joining us on our first quarter earnings Conference call. Joining me today are Terry Anderson, President and Chief Executive Officer, Chris, Maybe Chief Financial Officer arm, and Jan Gary Chief Operating Officer, and Ryan Berrett Senior Vice President marketing.

Dale Lewko: Joining me today are Terry Anderson, President and Chief Executive Officer, Chris Bibby, Chief Financial Officer, Armin Jahangiri, Chief Operating Officer, and Ryan Berrett, Senior Vice President, Market Before I turn it over to Terry and Chris to take you through our first quarter results, I'll remind everyone that this conference call includes forward-looking statements and non-GAAP and other financial measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated.

Speaker Change: I turn it over to Terry and Chris take you through our first quarter results I'll remind everyone that this conference call includes forward looking statements and non-GAAP and other financial measures with the associated risks outlined in the earnings release and our MD&A.

Speaker Change: Although all around dollar amounts discussed today are in Canadian dollars, unless otherwise stated finally, the press release financial statements and MD&A are available on our website as well as SEDAR. Following our prepared remarks, we will open the line to questions.

Dale Lewko: Finally, the press release, financial statements, and MD&A are available on our website as well as CDAR. Following our prepared remarks, we'll open the line to questions.

Terry Anderson: With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead. Thanks, Dale, and good morning, everyone. I'm pleased to discuss ARC's first quarter results and provide an update on our outlook for 2025 and beyond. First quarter production averaged 372,000 BOE per day, which was in line with our Q1 guidance of 370 to 375,000 BOE per day. Production included approximately 95,000 barrels per day of condensate, which was a significant contributor to the 400 million of free cashflow we generated in the quarter. In addition, our transportation portfolio allowed us to send more than 50% of our natural gas to higher-priced markets in the U.S., resulting in an average realized natural gas price that was more than double the local ECO benchmark.

Speaker Change: With that I'll turn it over to our President and CEO Terry Anderson Terry. Please go ahead.

Terry Anderson: Thanks, Dale and good morning, everyone.

Terry Anderson: I'm pleased to discuss our first quarter results and provide an update on our outlook for 2025 and beyond.

Terry Anderson: First quarter production averaged 372000 Boe per day, which was in line with our Q1 guidance of 370 to 375000 Boe per day.

Terry Anderson: That shouldn't included approximately 95000 barrels per day of condensate, which was a significant contributor to the $400 million of free cash flow we generated in the quarter. In addition, our transportation portfolio allowed us to send more than 50% of our natural gas to higher priced markets in the U S.

Terry Anderson: Resulting in an average realized natural gas price that was more than double the local equaled benchmark.

Terry Anderson: Operationally, FASET Base continues to deliver strong results. We invested $460 million dollars about a quarter of our 2025 budget and focused our drilling and completion activities at Atachi, Kaqua, and Greater Dawson. This will contribute to strong condensate growth in the second half of the year and achieve annual production guidance of 380,000 to 395,000 BOE per day, which was unchanged in the quarter.

Terry Anderson: Operationally its asset base continues to deliver strong results, we invested $460 million about a quarter of our 2025 budget and focused our drilling and completion activities and attach a kappa and greater Dawson.

Terry Anderson: This will contribute to strong condensate growth in the second half of the year and achieve annual production guidance of $380 to 395000 Boe per day, which was unchanged in the quarter.

Terry Anderson: In terms of the assets, I'll begin with attached. First quarter production averaged just over 31,000 BOE per day, which was in line with expectations. The production mix was approximately 60% liquids, including about 15,000 barrels per day of condensate. The reservoir deliverability is meeting our expectations, which is critical to achieve long term returns and provide confidence as we advance phase two of attacks. As mentioned in the press release, the ramp up in production at ATACHI was delayed to address some early stage emulsion at the facility. We operated at a reduced facility capacity beginning in late March to optimize our chemical program there, so Q2 production is expected to average between 30,000 and 35,000 BOE per day.

Terry Anderson: In terms of the assets I'll begin with Hitachi.

Terry Anderson: First quarter production averaged just over 31000 Boe per day, which was in line with expectations.

Terry Anderson: Production mix was approximately 60% liquids.

Terry Anderson: Clothing about 15000 barrels per day of condensate.

Terry Anderson: The reservoir Deliverability is meeting our expectations, which is critical to achieve long term returns and provides confidence as we advance phase two of attaching.

Terry Anderson: As mentioned in the press release, the ramp up in production at Hitachi was delayed to address some early stage in motion at the facility. We operated at a reduced facility capacity beginning in late March to optimize our chemical program. There. So Q2 production is expected to average between 30 and 35000.

Terry Anderson: Bo per day lease.

Terry Anderson: These types of events are not uncommon in new areas of this scale, and I'm pleased how our team was able to resolve them and limit the impact to operation. With that, we remain on track to grow production an average between 35,000 to 40,000 BOE per day at Hitachi in the second half of the year.

Terry Anderson: These types of events are not uncommon in new areas of this scale and I'm pleased how our team was able to resolve them and limit the impact to operations with that we are all remain on track to grow production and average between 35 35000 to 45 40000 Boe per day.

Terry Anderson: At attaching in the second half of the year.

Terry Anderson: At CAQA, we continue to build on the operating momentum from last year. Production averaged 162,000 BUE per day in the quarter, which was slightly above our interim forecast. We have an active program upcoming that will support volume and free cash flow growth over the balance of the year.

Terry Anderson: At <unk>, we continue to build on the operating momentum from last year.

Terry Anderson: Reduction averaged 162000 Boe per day in the quarter, which was slightly above our internal forecast.

Terry Anderson: We have an active program upcoming that will support volume and free cash flow growth over the balance of the year our strategy at cap ways to produce the asset at an average of 170 to 175000 Boe per day on a full year basis and continue to look for efficiencies to grow margins and free cash flow.

Terry Anderson: Our strategy at CAQA is to produce the asset at an average of $170,000 to $175,000 BOE per day on a full year basis, and continue to look for efficiencies to grow margins and free cash One method we are exploring at CAQ is the use of a dual frac system. This is expected to drive further efficiencies by reducing cycle time without compromising safety.

Terry Anderson: One method, we are exploring a cap, which is the use of a dual frac system. This is expected to drive further efficiencies by reducing cycle time without compromising safety.

Terry Anderson: Moving on to our Sunrise Asset. In late March, with Station 2 pricing near zero, we shut in 75 million cubic feet per day of natural gas production. This eliminated our natural gas exposure at Station 2 and preserved resource for when prices are higher.

Terry Anderson: Moving onto our Sunrise asset in late March with station to pricing near zero, we shut in and 75 million cubic feet per day of natural gas production.

Terry Anderson: This eliminated our natural gas exposure at station too and preserved reserves for when prices are higher this decision underscores our commitment to maintaining financial discipline and optimizing returns in response to market conditions, we continue to operate the asset with profitability in mind.

Terry Anderson: This decision underscores our commitment to maintaining financial discipline and optimizing returns in conditions. We continue to operate the asset with profitability in mind.

Terry Anderson: In March, we also advanced our natural gas marketing strategy by announcing a long-term LNG sale and purchase agreement with Exxon. Commencing with the Cedar LNG project expected in late 2028, Exxon will purchase all of ARC's LNG offtake from the project, and in return will receive international LNG pricing. With this contract and our previously announced Chenier LNG contracts, we will achieve our long-term market diversification strategy of linking approximately 25% of our future natural gas production to international prices.

Terry Anderson: In March we also advanced our natural gas marketing strategy by announcing a long term LNG sale and purchase agreement with Exxon commencing with the Cedar LNG project expected in late 2028, Exxon will purchase all of our LNG offtake from the project and in return.

Terry Anderson: We will receive international LNG pricing.

Terry Anderson: With this contract and our previously announced Cheniere LNG contracts we have.

Terry Anderson: We'll achieve our long term market diversification strategy of linking approximately 25% of our future natural gas production to international pricing.

Terry Anderson: Finally, I want to reaffirm that our long term plan remains on track, aiming to triple free cash flow per share by 2028 from 2024 level. ATACHI is a key part of this strategy and our observations from phase one have reinforced our conviction on the next phase of the project. With that in mind, I want to reiterate that we remain flexible to adjust our course should economic conditions materially weaken. ARC will continue to operate under our guiding principles of profitability, capital discipline, and financial strength.

Finally, I want to reaffirm that our long term plan remains on track aiming to tripled free cash flow per share by 2028 from 2024 levels.

Terry Anderson: Catchy as a key part of this strategy and our observations from phase one have reinforced our conviction on the next phase of the project with that in mind I want to reiterate that we remain flexible to adjust our core should economic conditions conditions materially weaken.

Terry Anderson: Arc will continue to operate under our guiding principles of profitability capital discipline and financial strength.

Chris Bibby: Thank you, and I'll now turn it over to our CFO, Chris Bibby, to provide further insights into our financial performance. Thanks, Terry. Good morning, everyone. We're operating in financial performance surpassed analyst estimate. Production was slightly ahead, cash flow per share was 9% above. Finally, free cash flow is $400 million, with 70% above estimates, in part due to lower capital expenditures during the quarter. We deliver average quarterly production of 372,000 BOEs per day with a production mix of 63% natural gas, 37% condensate and liquid. generated funds from operations of $857 million, an increase of 10% from the previous quarter.

Terry Anderson: Thank you and I'll now turn it over to our CFO, Chris <unk> to provide further insights into our financial performance.

Chris Maybe: Thanks, Derek good morning, everyone.

Chris Maybe: Our operating and financial performance surpassed analyst estimates production was slightly ahead cash flow per share was 9% above finally free cash flow was 400 million with 70% above estimates in part due to lower capital expenditures during the quarter.

Chris Maybe: We delivered average quarterly production of 372000 <unk> per day with a production mix of 63% natural gas, 37% condensate and liquids.

Chris Maybe: Generated funds from operations of $857 million.

Chris Maybe: An increase of 10% from the previous quarter.

Chris Bibby: continue to realize natural gas prices well above local benchmarks by utilizing our transportation portfolio to reach more attractive end markets in the U.S. In the quarter, ARC realized an average natural gas price of $4.19 per MCF, which compared to the ACO benchmark of $2, and the NIMEX Henry Hub price of $3.65 per MCF US. Of the $400 million dollars in free cash flow in the quarter, ARC distributed approximately 60%, or roughly $245 million dollars to shareholders. We remain steadfast in our plan to distribute essentially all free cash flow to shareholders over the course of the year.

Chris Maybe: We continue to realized natural gas prices well above local benchmarks by us utilizing our transportation portfolio to reach more attractive end markets in the U S.

Chris Maybe: In the quarter arc realized an average natural gas price of $4 19 per Mcf, which compared to the April benchmark of $2 Nymex Henry hub price of $3 65 per Mcf U S.

Chris Maybe: Of the $400 million in free cash flow in the quarter, our distributor approximately 60% or roughly $245 million to shareholders.

Chris Maybe: We remain steadfast.

Chris Maybe: And to distribute essentially all free cash flow to shareholders over the course of the year, so with the debt Paydown in Q1.

Chris Bibby: So with the debt paid out in Q1, we are in excellent position to repurchase our shares and what we do is a very opportune time. At Strip, we estimate annual free cash flow in the range of $1.3 to $1.5 billion, or roughly 10% of our market cap. That would imply approximately $1.1 billion return to shareholders through the share buybacks and after our dividends of $400 billion. As many of you know, our balance sheet remains strong and in a great place.

Chris Maybe: Excellent position to repurchase our shares in what we view as a very opportune time.

Chris Maybe: At strip, we estimate annual free cash flow in the range of one three to $1 5 billion or roughly 10% of our market cap.

Chris Maybe: Fly approximately $1 1 billion returned to shareholders through the share buybacks and after our dividends up $400 million.

Chris Maybe: As many of you know our balance sheet remains strong and a great place.

Chris Bibby: We allocated roughly $300 million to debt reduction in the quarter, and as a result, long-term debt was $1.1 billion, with net debt equating to approximately 0.5 times cash Moving on to our Outlook, our 2025 annual guidance remains unchanged. ARC plans to invest roughly $1.7 billion for the year, with annual production expected to average between 380 to 395,000 BOEs per day. Second quarter production is expected to average approximately 380,000 BOEs per day, inclusive of planned turnaround activities at CACWA and Andy Creek.

Chris Maybe: We allocated roughly $300 million of debt reduction in the quarter and as a result long term debt was $1 1 billion with net debt equating to approximately 0.5 times cash flow.

Chris Maybe: Moving onto our outlook, our 2025 annual guidance remains unchanged.

Chris Maybe: Plans to invest roughly $1 7 billion for the year with annual production expected to average between 380 to 395000 Boe's per day.

Chris Maybe: Second quarter.

Chris Maybe: Production is expected to average approximately 380000 boe's per day inclusive of planned turnaround activities at <unk> and Ante Creek.

Chris Bibby: The second half of the year, we expect production to grow to an average of 390 to 400,000 eel eels per day. Production in Hitachi is expected to average roughly 30,000 to 35,000 BOEs per day in the second quarter, then increasing to between 35,000 to 40,000 BOEs per day in the second half of the year.

Chris Maybe: The second half of the year, we expect production to grow to an average of 390 to 400000 Boe's per day.

Chris Maybe: Production that attach he is expected to average roughly 30% to 35000 Boe's per day in the second quarter than.

Chris Maybe: And then increasing to between 35 to 40000 Boe's per day in the second half of the year.

Chris Bibby: Our priority this year is to demonstrate the profitability of ARC incorporating a full year of Itachi. Under current strip, we expect funds flow per share to more than double to approximately $2.50 per share, driven mainly by Itachi and capital growth in the second half of the year.

Chris Maybe: Our priority. This year is to demonstrate the profitability of arc incorporating a full year of attaching under current strip, we expect funds flow per share to more than double to approximately $2 50 per share driven mainly by attaching <unk> capital growth in the second half of the year.

Chris Bibby: Our focus this year is also return of capital, where we intend to once again distribute essentially all free cash flow to shareholders through a combination of our growing based dividend and share buyback. As I mentioned, under the current forward curve, we will return approximately $1.5 billion of free fund flow this year to shareholders.

Chris Maybe: Our focus this year is also return of capital, where we intend to once again distribute essentially all free cash flow to shareholders through a combination of our growing base dividend and share buybacks.

Chris Maybe: As I mentioned under the current forward curve.

Chris Maybe: Will return approximately $1 5 billion of free funds flow this year to shareholders.

Terry Anderson: With that, I'll pass it back to Terry for closing remarks. Thanks, Chris. Over the past 29 years, we've built a company that is focused on profitability and stability through the site. Under strict prices, we are on track to generate 10% of our market cap in free cash flow this year. And with our balance sheet where we want it, we plan to return all of that to our shareholders.

Terry Anderson: With that I'll pass it back to Terry for closing remarks.

Terry Anderson: Thanks, Chris.

Over the past 29 years, we built a company that is focused on profitability and stability through the cycles under.

Terry Anderson: Under strip prices, we are on track to generate 10% of our market cap and free cash flow this year.

Terry Anderson: And with our balance sheet, where we want it we plan to return all of that to our shareholders.

Terry Anderson: Equally important in times of economic uncertainty is the resilience of ARC. We have accumulated an enviable asset base that is both low cost and long duration. Our balance sheet is strong and we built a culture of discipline across the organization. At roughly $40 WTI and $2 Henry Hub, ARC is able to sustain production and fund the dividend within cash. So as we look forward, we'll continue to conduct our business in a disciplined manner, focused on risk-managed value creation as we execute our long-term plan. We'll measure our success by continuing to improve our per-share metrics and generate a strong return on capital.

Terry Anderson: Equally important in times of economic uncertainty is the resilience of arc, we have accumulated accumulated an enviable asset base that is both low cost and long duration, our balance sheet is strong and we built a culture of discipline across the organization.

At roughly $40 <unk> and $2 Henry hub arc is able to sustain production and fund the dividend within cash flow.

Terry Anderson: So as we look forward, we will continue to conduct our business in a disciplined manner focused on risk manage value creation as we execute our long term plan.

Terry Anderson: We will measure our success by continuing to improve on our per share metrics and generate a strong return on capital.

Terry Anderson: Thank you for your continued support, and we look forward to delivering on our commitment.

Terry Anderson: For your continued support and we look forward to delivering on our commitments.

Operator: With that, we can open the line up for questions. Thank you.

Terry Anderson: With that we can open the lineup for questions.

Terry Anderson: Thank you.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by number one on your Touchtone phone you will hear up comp Netgear. Ken has been raised should you wish to decline from the polling process. Please press star followed by the number too.

Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys.

Kaleinoheaokealaula Akamine: Your first question comes from Kalei Akamine of Bank of America. Please go ahead. Hey, good morning, guys. Thanks for taking my questions. My first question is on the shape of the Atansi ramp. It kind of has us thinking about the lower half of the oil guidance here for the year. Can you give us some confidence on the path forward for your other condensate asset at Catcoa? What does that ramp look like? And where do you think it could top out?

Kelly Bania: First question comes from Kelly Bania.

Kelly Bania: Of Bank of America. Please go ahead.

Kelly Bania: Hey, good morning, guys. Thanks for taking my questions. My first question is on the shape of the AT&T ramp. It kind of has is thinking about the lower half of oil guidance here for the year can you give us some confidence on the path forward for your other condensate asset at <unk>, what does that ramp look like and where do you think it could top out.

Chris Bibby: Yvette, good morning. It's Chris here. Yeah, so again, in 25, kind of similar to 24 as well. First half of the year is certainly a, it's a lower production half for us. And then sequentially, each quarter, we would expect production to ramp, specifically at CAFWA, where, you know, Q4 last year, we were, you know, over 190,000 VUEs a day. As we just mentioned in the call, during the quarter we were $162,000, and that will ramp to above $180,000 by the end of the year. And that's really going to drive a lot of the condensate growth for the corporation overall.

Chris Maybe: You bet good morning, it's Chris here.

Chris Maybe: Yes, so again in 'twenty five kind of similar to 224 as well.

Chris Maybe: First half of the year is certainly it's a lower production half for us.

Chris Maybe: And then sequentially each quarter, we would expect.

Chris Maybe: Production of Rev, specifically at capital where.

Chris Maybe: Q4 last year, we were over 190000 Boe's a day.

Chris Maybe: As we just mentioned in the call.

Chris Maybe: During the quarter were 162000 and that will ramp to about 180000 by the end of the year and Thats really going to drive a lot of the condensate growth.

Chris Maybe: For the corporation overall that combined with the second half attach your volumes is where it will get into end of the guidance range for condensate and crude oil. So this is.

Kaleinoheaokealaula Akamine: That combined with the second half of Tachi volumes is where we'll get into the guidance range for condensate and crude oil. It's typical in terms of just the activity levels we have in the first half and then production coming on in the second half. So a pretty high confidence factor at this point in time. Got it, Chris. I appreciate that. It sounds like you guys are still in really good shape for the year.

Chris Maybe: It's typical in terms of just the activity levels, we have in the first half and then production coming on in the second half so pretty high confidence factor at this point in time.

Speaker Change: Got it great I appreciate that it sounds like you guys are still have a really good shape for the year.

Kaleinoheaokealaula Akamine: My next question is on Sunrise. I think the shut-in here makes a lot of sense, given where prices are at Station 2. My question is, why wait until March? We kind of thought those volumes looked a touch high in the first quarter. So the question is, why not reroute a little bit more to other markets, given your strong commercial model?

Speaker Change: My next question is on Sunrise I think the shut in here. It makes a lot of sense, given where prices are patient too. My question is why wait until March.

Speaker Change: Thought those volumes looked a touch high in the first quarter. So the question is why not reroute a little bit more to other markets, giving your strong commercial model.

Chris Bibby: Yeah, thanks, Clay. You know, if you think about kind of where we're sending our volumes, you know, pricing at Western Canadian Hubs, both Akin and Station 2, it was okay in the first quarter. Only late in the quarter did Station 2 weaken. Relative to downstream markets or all the other markets where we sell, we satisfy those volumes first. They flow completely full every day during the quarter when obviously they're in the money as much as they are. So the priority would be downstream volumes and then making sure we sell volumes into the local market if the pricing makes sense.

Speaker Change: Yes, Thanks, Greg.

Speaker Change: If you think about kind of where we're sending our volumes pricing at western Canadian hubs, both Aiken station too.

Speaker Change: Actually it was okay in the first quarter only late in the quarter did station to weaken.

Speaker Change: Relative to downstream markets. So all the other markets, where we sell we do we satisfy those volumes first they flow completely full.

Speaker Change: Everyday.

Speaker Change: During the quarter, when obviously theyre in the money as much as they are so the priority would be downstream volumes and then making sure we sell volumes into the local market. If the pricing makes sense. So in this scenario thats when we pull volumes off the market late in the quarter to reduce station to down to zero.

Kaleinoheaokealaula Akamine: So in this scenario, that's when we pull volumes off the market late in the quarter to reduce Station 2 down to zero. Got it. That makes sense. Thanks, Chris. You bet.

Speaker Change: Got it that makes sense. Thanks, Greg.

Speaker Change: You bet.

Operator: As a reminder, if you wish to ask a question, please press star followed by the number one.

Speaker Change: As a reminder, if you wish to ask a question. Please press star followed by the number one.

James Kubik: Your next question comes from Jamie Kubik of CIBC, please go ahead. Yep, good morning and thanks for taking my question. I'm just curious if you can talk a little bit more on the emulsion that you're seeing at Atachi and how that compares to, I guess, original expectations and then perhaps how you might adjust phase two to accommodate for something similar. Thanks.

Speaker Change: Your next question comes from Jamie Kubik CIBC. Please go ahead.

Jamie Kubik: Yes, good morning, and thanks for taking my question I'm, just curious if you could talk a little bit more on the motion that youre seeing at attached and how that compares to I guess original expectations and then perhaps how you might adjust phase two to accommodate for something similar.

Speaker Change: Okay.

Armin Jahangiri: Hey, Jamie, this is Armin. So the emulsion issue is nothing abnormal, I guess, as far as the liquid rich or condensate rich facilities go. You know, as you know, the first phase of every plant is to separate the products from each other. So gas water and condensate. And sometimes due to the chemistry of these products, especially the water and condensate, the separation becomes a bit more difficult. And that causes a layer of emulsion between these two phases. What we need to do is just to basically figure out the right chemical program to be able to effectively break the emulsion.

Army: Hey, Jamie this is army.

Speaker Change: So the emotion issue.

Speaker Change: Is nothing abnormal I guess as far as the.

Speaker Change: In the liquid rich condensate rich facilities go.

Speaker Change: That as you know the first phase of every plant is to separate the products from each other so gas.

Speaker Change: Water and condensates, and sometimes due to the chemistry of these products, especially the water and condensate of separation becomes a bit more difficult.

Speaker Change: And that causes a layer of emulsion between these two phases.

Speaker Change: What we need to do is just to basically figure out the right chemical program to be able to effectively break the motion and that's effectively the right chemical type right level of concentration.

Armin Jahangiri: And that's effectively the right chemical type, right level of concentration, right retention time. That's what we are working on effectively to get to an optimized operating process, I guess, when it comes to the Itachi plant. This is not any different for phase two. We have to deal with the same exact process as we bring new production on and require the same level of diligence.

Speaker Change: Great retention time, so that's what what we are working on effectively to get to an optimized operating <unk>.

Speaker Change: Process I guess when it comes to.

Speaker Change: The Apache plant.

Speaker Change: This is not any different for phase III, we have to deal with the same exact process as we bring new production on and requires the same level of diligence.

Terry Anderson: Jamie, it's Terry here. I might add to that, like every new facility that we start up, there's always going to be these subtle little challenges that you have to address. And this is another one that we've always...

Terry Anderson: Hey, Jamie it's Terry.

Speaker Change: Terry here I might add to that.

Speaker Change: Like every new facility that we start up there's always going to be the subtle little challenges that you have to address and this is another one that we've always had.

Terry Anderson: have to we've had to address that other ones from Dawson to Parkland to anything new in CAFLA too so and these things when you it's not flipping on the switch and then everything works perfectly we are always adjusting things definitely throughout the first year so you're going to have these little bumps in the road along the way on in the first year of this production but this is something that it'll it will be resolved there's no question about it we've seen it before in all of our other areas so it's just a matter of time before we resolve it here and we and we've got a we're on the path to that right now.

Speaker Change: Have to we'd have to address that other ones from das into parkland anything new in cap rate too so and these.

Speaker Change: These things when you it's not flipping on the switch and then everything works perfectly we are always adjusting things.

Speaker Change: Throughout the first year, so youre going to have these little bumps in the road along the way.

Speaker Change: In the first year of this production, but this is something that.

Speaker Change: It will be resolved there is no question about it we've seen it before in all of our other areas. So it's just a matter of.

Speaker Change: Time before we resolve it here and we've got a we're on the path to that right now.

James Kubik: And production is strong. Like for the first quarter here, it was still 31,000 BOE a day, so people have to realize that it's still strong production, 15,000 barrels per day of condensate coming out of here. So everything is working well, especially for a new facility that's being brought on. Okay, appreciate the color there, guys.

Speaker Change: And production is strong.

Speaker Change: For the first quarter here was still 31000 BOE a day so people have to realize that it's still strong production of 15000 barrels per day.

Speaker Change: Of condensate.

Speaker Change: Condensate coming out of here, so everything is working well as for especially for a new facility Thats being brought online.

Speaker Change: Okay I appreciate the color there guys.

James Kubik: And a follow-on question, a little bit of a different area, but capital spending for ARC in the quarter, well below where we expected in consensus estimates. Can you talk a little bit about the shape of spending in 2025, quarter by quarter? And then could you also talk a little bit about any inflation impacts you're seeing in your AFEs? I know that there's been some puts and takes in steel and sand. Anything that you can talk about there?

Speaker Change: A follow up question, a little bit of a different area, but.

Speaker Change: Capital spending for arc in the quarter, well below where we expected and consensus estimates.

Speaker Change: Can you talk a little bit about the shape of spending in 2025.

Speaker Change: Quarter by quarter, and then could you also talk a little bit about any inflation impacts you are seeing.

Speaker Change: And your <unk> I know that there is.

Speaker Change: So puts and takes in steel and sand anything that you can talk about there. Thank you.

James Kubik: Thank you.

Chris Bibby: Hey, Jamie, it's Chris. I'll tackle the first part of that question, just in terms of the shape of the spending profile. So yes, Q1 was $450,000-ish. So, you know, a little less than we would have anticipated. Really, that's just a shift into Q2. You know, when we set out the capital program, the teams have the flexibility to shift capital to meet their operational needs. So really, Q2, you know, we're probably going to be somewhere in the range of $550,000. As you know, we don't guide quarter-to-quarter capital. We just let the teams execute the program as best as they see fit.

Speaker Change: Hey, Jamie its Chris ill tackle the first part of that question just in terms of the shape of the spending profile.

Speaker Change: Q1 was 450 ish, so little less than we would've anticipated really it's just a shift into Q2.

Speaker Change: When we set up the capital program.

Speaker Change: To have the flexibility to shift capital to meet their operational needs. So really Q2.

Speaker Change: Probably going to be somewhere in the range of $5 50, as you know, we don't guide quarter to quarter capital.

Speaker Change: Let the team to execute the program is asbestos AC fit and then the back half of the year is a little bit lower but not materially going forward to get to our guide of 106 to $1 seven I'll, let <unk> speak to the to the inflationary impacts that evening.

Chris Bibby: And then the back half of the year is a little bit lower, but not materially going forward to get to our guide of, you know, $160,000-$170,000.

Armin Jahangiri: I'll let Armin speak to the inflationary impacts that he's seeing. Yeah, I guess, Jamie, on the subject of the sand, we have realized some costs associated with the tariffs that the Canadian government has implemented, I guess, on imported sand that has been passed on to operators. The dollar amount is insignificant, I guess, in terms of the total sand consumption. So it's not really material in terms of impact on our capital program. Okay, thank you. That's all for me.

Jamie Kubik: Yes, I guess, Jamie on the subject of this and we have realized some cost.

Speaker Change: Costs associated with the tariffs that date in Canadian.

Speaker Change: And government has.

Speaker Change: Implemented I guess on imported <unk>.

Speaker Change: And that has been passed on to operators.

Speaker Change: The dollar amount it is insignificant I guess in terms of the.

Speaker Change: Total sand consumption.

Speaker Change: So it's not really material in terms of impact on our capital program.

Speaker Change: Okay.

Speaker Change: Okay. Thank you that's all for me I'll hand, it back.

Operator: I'll hand it back.

Patrick Orwer: Your next question comes from Patrick Orwok of ATV Capital Markets, please go ahead.

Speaker Change: Your next question comes from Patrick <unk> of ATV capital markets. Please go ahead.

Patrick: Hey, Peter.

Patrick Orwer: Your next question comes from Patrick Orwer of ATV Capital Markets, please go ahead.

Patrick: Your next question comes from Patrick over of ATV Capital markets. Please go ahead.

Patrick Orwer: Hey guys, sorry about that. I just, I was just curious, I wanted to ask a little bit further on that Station 2 exposure here. Sunrise Asset is going to support the gas that you're going to ship through your LNG Canada agreement, these being sort of the last marginal molecules in the portfolio that you sell at Station 2. Once that agreement is on, does that sort of eliminate that exposure and the need to shredding gas at the asset going forward in the second half of the year?

Speaker Change: Hey, guys, sorry about that.

Patrick: I just I.

Patrick: I was just curious I wanted to ask a little bit further on that station to exposure here.

Patrick: Sunrise assets.

Patrick: Support the gas that youre going to ship through your LNG, Canada agreement these being sort of the last marginal molecules in the portfolio that you sell at vision. Two once have agreements on does that sort of eliminate that exposure and the need to shut in gas at the asset going forward in the second half of the year.

Chris Bibby: Yeah, hey, Patrick. Thanks for the question on that. Yeah, no, we would, we would anticipate that, you know, we will have zero Station 2 for the rest of the year. And that $75 million that we have shut in today is the only exposure that we would have to Station 2.

Patrick: Yeah, Hey, Patrick.

Speaker Change: Thanks for the question on that yes, we would we would anticipate.

Speaker Change: We will have zero station to for the rest of the year.

Speaker Change: And that 75 million that we have shut in today is the only exposure that we would have to station too so.

Patrick Orwer: So, you know, the Shell contract that we have starting up at the at the commencement of LNG Canada has no bearing on any further gas shut in. Okay.

Speaker Change: The shell contract that we have starting up at the at the.

Speaker Change: Commencement of LNG, Canada has no bearing on any.

Speaker Change: Further gas shut ins.

Speaker Change: Okay.

Patrick Orwer: And then in the quarter, you sort of, you know, you pay down a little bit of debt here, obviously, we're in a pretty choppy commodity environment.

And then in the quarter.

Speaker Change: Thank you.

Speaker Change: Pay down a little bit of that here, obviously, we're in a pretty choppy commodity environment.

Patrick Orwer: Can you, how do you see the NCIB, the pacing of return of capital throughout the balance of the year? Are you a little more cautious in how you deploy that with the environment that we've been in, given the second half of the year looks like a bigger production ramp for the company?

Speaker Change: Yes.

Speaker Change: How do you see the MTI be the pacing of return of capital throughout the balance of the year, you're a little more cautious.

Speaker Change: And how you deploy that with the environment that we've been in.

Speaker Change: Given the second half of the year it looks like a bigger production ramp for the company.

Chris Bibby: Hey Patrick, it's Chris here. I mean, yeah, Q1 obviously had a lot of things going on in terms of quite a long blackout for us, where we're always pretty conservative, and then a lot of noise on tariffs and general economic concern. But we did, in March, get going pretty aggressively on it. We're pretty comfortable with how much free cash we're going to be able to generate. Obviously, it does fluctuate a little bit with commodity prices, but we're not programmatic on the NCIB. So we'll take a look at the relative value. We do want to deploy all of the free cash flow, and we have flexibility quarter to quarter.

Speaker Change: Hey, Patrick it's Chris here.

Speaker Change: Yes. The Q1, obviously was was had a lot of things going on in terms of quite a long blackout for us where were always pretty conservative and there are a lot of noise on tariffs.

Speaker Change: General economic concern, but we did in March get going pretty aggressively on it.

Speaker Change: We're pretty comfortable with with how much free cash are going to be able to generate obviously it does fluctuate a little bit with with commodity prices, but we're.

Speaker Change: No we're not programmatic on the NCI be so we'll take a look at the relative value. We do want to deploy all of the free cash flow and we have flexibility quarter to quarter. So.

Chris Bibby: So, you know, we're confident in 100% free cash flow deployment by the end of the year, plus or minus, but there's no set rules, I would say, on when we have to do it. So you'll see us get back in the market here next week and take it day to day.

Speaker Change: Confident in 100%.

Speaker Change: Free cash flow deployment by the end of the year, plus or minus but theres no set rules I would tell them when we have to do it so you'll see us get back in the market here next week and take it day to day.

Patrick Orwer: Okay. Terrific. Thank you very much.

Speaker Change: Okay terrific. Thank you very much.

Operator: As a reminder, if you wish to ask a question, please press star followed by the number 1.

Speaker Change: As a reminder, if you wish to ask a question. Please press star followed made it number one.

Speaker Change: Yeah.

Operator: Thank you ladies and gentlemen. That concludes our question and answer session.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I will now turn the conference back over to Dale Luca.

Dale Lewko: I will now turn the content back over to Dale Lewko. All right. Thanks, everyone.

Speaker Change: Alright, thanks, everyone that concludes the call have a good day.

Operator: That concludes the call. Have a good day.

Operator: This concludes today's conference. Thank you for your attendance.

Speaker Change: This concludes today's conference. Thank you for your attendance you may now disconnect your lines.

Operator: You may now disconnect your lines.

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Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

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Speaker Change: Sure.

Speaker Change: No.

Speaker Change: Sure.